Airline Biz Blog

The confusing world of Japan and Japan Airlines

About every day, the folks at American Airlines read the latest out of Japan and say “huh?”

What happens to Japan Airlines is very important to them because they’re fighting to hold onto the carrier, their Oneworld partner for a large part of Asia. But it’s hard for them to know how they’re doing in fighting off Delta Air Lines, which wants JAL to switch to Delta and the SkyTeam alliance.

On one hand, nobody at JAL or in Japan has said that Delta is favored over American or that officials have decided not to accept an equity investment from either American or Delta.

On the other hand, that’s what the news media in Japan are reporting.

American CFO Tom Horton is in Japan right now, and plans a 2 p.m. Tuesday press conference (that’s 11 p.m. Monday). Maybe this trip will clarify the situation for American.

Here’s the media Q&A with American’s chairman and CEO, Gerard Arpey, after he and Gary Kelly spoke to the Professional Convention Management Association meeting in Dallas:

Question: What the heck is happening in Japan?Gerard Arpey: “Well, it’s hard to tell.”

Question: Reports out of Japan have quoted officials there as saying the airline and the government prefer Delta to American Airlines. Has that been communicated to American officials?Arpey: “No, and of course we have a stronger global partnership network. We have a stronger U.S. network and we are best positioned to work with JAL through their restructuring. We are the only U.S. carrier that has any realistic chance of receiving antitrust immunity under the open skies agreement. We are best positioned to work with a company that obviously is going through some very difficult financial times.”

Question: If you lose JAL, would American add service or cut service? What would be the effect of losing your partner?Arpey: “Oh, that remains to be seen. We’ll have to cross those bridges when and if they come. But obviously we connect a lot of traffic to Japan Airlines in Narita so it wouldn’t be good for our services not to have them as a partner.”

Question: Several media reports have that they do not want an equity investment from either American or Delta. Has that been communicated to American?Arpey: “No, not clearly.”

Question: Through newspapers?Arpey: “Yeah. I know what I read, just like you. But it’s a very fluid, difficult situation to read or to understand. The company, obviously from press reports, is under a great deal of financial stress. We’re not privy to any inside information about JAL’s financial challenges, so we, like you, simply read about their financial situation publicly.”

Question: Have you heard anything to suggest they don’t want an investment at all or not until after restructuring?Arpey: “Well, it’s very hard to comment on that because the press reports have varied wildly. So if you go back maybe six weeks or eight weeks ago, the investment was the only thing that mattered, and that it needed to be a quick injection of capital. Those were the press reports. Throughout this process, I’ve learned not to really comment on the press reports because I’m not sure how accurate they are.”

Question: You haven’t received any direct information from JAL or the government that the whole picture has changed?Arpey: “No, we have not, to my knowledge. We have a team of people in Tokyo right now and they may have some information that I don’t have. But no, to my knowledge, we have not.”

Question: Would you be willing to invest in JAL if it enters bankruptcy?Arpey: “What we’ve said is we’re willing to participate in the restructuring of the company, which we believe will be government-led. That’s what we’ve said. So if they do go through a – I’ve read press reports today that they have a version of Chapter 11 in Japan, I don’t know if that’s accurate or not – but if they go through a Chapter 11-style restructuring, yes, we are willing to participate and work with the government and to work with Japan Airlines in a government-led restructuring.”

Question: Are you worried that if they do go into bankruptcy, that they’ll sever their contract with Oneworld?Arpey: “Not particularly worried about that.”

Question: If there is no equity stake from American or Delta, doesn’t that give Delta a tremendous advantage?Arpey: “Not at all. In fact, I think it would give us the advantage because we have a stronger U.S. network, stronger global partnership in Oneworld and we can bring more commercial value than any other carrier can. So we’re in the strongest position either way.”

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Terry Maxon writes about items of interest to travelers and the aviation community.